Corporate governance and performance: a comparative study of Shari’ah approved and non-shari’ah approved companies on Bursa Malaysia
This study examines whether Shari’ah approved companies with majority Muslim directors adopt better corporate governance (CG) than non-Shari’ah approved companies with majority non-Muslim directors and whether the performance of the former is better than that of the latter. The objective of this...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Emerald Group Publishing Limited
2006
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/29614/ http://irep.iium.edu.my/29614/ http://irep.iium.edu.my/29614/1/Bursa_Malaysia.pdf |
| Summary: | This study examines whether Shari’ah approved companies with majority
Muslim directors adopt better corporate governance (CG) than non-Shari’ah
approved companies with majority non-Muslim directors and whether the
performance of the former is better than that of the latter. The objective of this
study is to determine whether religious factor has an influence in adopting
corporate governance mechanisms and in performance. Performance of the
companies is measured in relation to three perspectives, namely, Shari’ah
compliance, environmental performance, and social performance. This study
used secondary data and the leading 50 firms were selected from each group
based on their market capitalization for the year 2002. The proxies for good
corporate governance are CEO non-duality, the proportion of non-executive
directors on the board, and the proportion of independent non-executive
directors on the board. The proxies used to measure Shari’ah compliance are
the ratio of prohibited income to total income and the ratio of prohibited
expenses to total expenses. The variables used to measure the environmental
and social performance are certification of ISO 14001 and OHsas 18001,
respectively. The results generally showed that there is little significant
difference between the CG and performance of Shari’ah approved companies
with majority Muslim directors and non-Shari’ah approved companies with
majority non-Muslim directors, although the former is marginally better for
both, in a few instances. |
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